Banking
Saving account rate hike could put pressure on banks’ margins

The RBI says that the competition in this space, which was non-existent earlier, could rise as banks with lower CASA ratio could rush to gain such deposits by raising rates

The Reserve Bank of India (RBI), in its Financial Stability Report (FSR) for December 2011, warns that competition among the banks to offer higher interest rate on saving accounts could put pressure on banks’ margins.

According to the apex bank “The impact of such rate hikes on banks’ profitability will need to be monitored carefully as already the banks’ cost of funds have gone up and such rate hikes will put additional strains on banks’ net interest margin.”

It further added that the effect, however, may be muted, based on the churn in customers and cost structures adopted by individual banks. A corollary to the event would be that in a falling interest rate scenario, saving bank deposits rate may also moderate accordingly.”

The RBI says that the competition in this space, which was non-existent earlier, could rise as banks with lower CASA (current account savings account) ratio could rush to gain such deposits by raising rates.

According to the FSR, a major attraction of saving deposits for banks is that it offers low-cost source of funds, as evident from the fact that banks with higher share of CASA deposits (current account- saving account), of which saving deposits is a major part, enjoy low-cost deposits. CASA deposits are not uniform among the banks.
RBI feels that, “Banks are likely to partially offset the impact of the increase in interest cost by levying transaction and servicing charges and thus pass on the additional cost to the customer.”  

The apex on 25 October 2011 deregulated interest rates for savings accounts in banks. Subsequently few banks raised interest rates to 6% on savings accounts compared to the earlier 4%. For instance, private sector player YES Bank raised it up to 6% and recently raised it to 7% per annum on deposits of Rs1 lakh and above.

Kotak Mahindra Bank followed with 6% rate per annum on all savings accounts with balance above Rs1 lakh and IndusInd Bank is offering 5.5% per annum where the balance is below Rs1 lakh and 6% per annum for accounts having more Rs1 lakh.

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COMMENTS

Vinay Joshi

6 years ago

MDT,

I'm perplexed that with Ms.Sucheta & Mr. Debashish around how you always get things wrong?

Write to me if i'm wrong!

What is the reverse repo rate? What is the overnight call money rate? Why RBI removes cap on 'mobile banking transactions'?

Why RBI has allowed banks to borrow additional from MSF? Why only on overnight basis? Further RBI has also stated that can borrow [-]1% SLR on overnight basis! It will not be construed as default in SLR!

Where is the liquidity? Advance Tax/Service tax has sucked it up!

About $160Bn India borrowings from EU is facing an uncertain future! De- leveraging!

By June 2012, $137Bn [43.5% of total present forex reserves!] external debt up for maturity.!?

What about NPA's? Bad debts!

SBI has done a wise thing of postponing its $5Bn FCB! WHY IT REQUIRED?

By Dec 17, banks had borrowed record 1.66L Cr. WHY?!!

It's 2.91% of aggregate instead of MSF 1%!

Is there credit growth? In fact lesser by 65K Cr. & deposit growth higher by 150K.Cr! WHY?!

Why RBI's US Treasury Holdings dropped by $6.6Bn?

Why RBI has infused thro" OMO 24K.Cr? [buy back of excess securities.]

So by raising int. rates the banks are retail borrowers, depositors park long term apart from 6%&7% paying banks depositors which is not for common man!

MDT, i've would have appreciated had you substantiated by real figures!

HENCE, MDT DO NOT PROPAGATE FLAWED THEORY! OK!

RATHER AMEND YOUR VIEWS TO STATE THAT ---- YES- RETAIL DEPOSITS WILL STRENGTHEN THE BANKS DEPOSIT BASE TO SEEK LOW COST CASH FLOW @4%-5%. [6&7 are differentials.]

It was a bad piece of article, never ever expected from MoneyLife!

OH! You have to attribute it it to RBI Fin Report! What are your analysis!

PLEASE FORWARD TO ME RBI REPORT! It has never stated on retail margins! I'm reproducing hereunder the pertaining para for YOUR INFO!

Quote " Pointing out that bank margins could come under pressure, the RBI said servicing of loans have come under stress due to rise in input prices, interest rates, and slackening demand and infrastructure constraints"...... Unquote.

Sadly, Ms.Sucheta & MDT not highlighting that FSR has stated that the banking industry can cope with credit risk shocks!Neither on 'stress test'.

So Ms.Sucheta & MDT have it from me - not SB A/c int. but debts can create untoward position with current a/c & fiscal deficits!

Regards,

N.B. never fake reports to put in your thoughts.

REPLY

Paresh

In Reply to Vinay Joshi 6 years ago

We readers really feel sorry to your parents who named you Vinay, where there is not even a single point in your rants that justifies the name.
Anyway, before calling a genuine report as fake because you think you are more wise and know everything is not good either. So stop barking. Here is the link to the original report http://rbidocs.rbi.org.in/rdocs/Publicat...
And keep your thoughts withing your eyes and ears only.

Vinay Joshi

In Reply to Paresh 6 years ago

Mr. Paresh,

I would have appreciated your professional response. It would have reflected you in high esteem.

Regards,

sachin

6 years ago

"This is some sample text. You are using FCKeditor."

Where is the article?

REPLY

Vinay Joshi

In Reply to sachin 6 years ago

Mr.Sachin,

FCKeditor is pase its CKEditor! OK!

What do you know about 'MoneyLife'?

What is some 'sample text'? What is the rating of CKEditor?

Well beyond comprehension.

Regards,

Sri Lanka way more charitable than India

India ranks 91st among the most ‘giving’ nations; Asians become more charitable

Despite all the atrocities and human rights abuses that Sri Lanka is infamous for, it definitely beats the largest democracy by being more charitable. That is what a study by Charities Aid Foundation (CAF) says. According to its report—‘World Giving Index 2011’—India occupies the 91st position whereas her neighbour holds the 8th position on the list.

But India has improved considerably. “India has indeed experienced a marked rise up the World Giving Index rankings, from 134th to 91st place. There was 14% growth in ‘giving money’, a 9% rise in ‘helping a stranger’ and a growth of six percentage points in ‘volunteering time’,” said a press release of CAF India. Even Pakistan has shown considerable improvement in all the areas.

Out of the 153 nations studied, USA is the most charitable, followed by Ireland and Australia—which held the top position along with New Zealand last year. The World Giving Index shows that the world has become a more charitable place in the last year—with a 2% increase in the global population ‘helping a stranger’ and a 1% increase in people volunteering. However, the worldwide financial turmoil has led to 1% fewer people giving money to a charity than in 2010.

Even though it occupied the 9th position on the list, Thailand has most people giving money than the others, with 85% of the population making at least one donation per month. The UK is second, with 79%, and Ireland and the Netherlands jointly third with 75%.

Turkmenistan has the 61% of the population ‘volunteering time’. Second is Liberia, 48%, and third is Sri Lanka, 46%. The largest increase in the percentage of population ‘giving money’ has been in Asia, with an increase of 9% in South Eastern Asia and an increase of 10% in Southern Asia.

According to the study, the most commonplace giving behaviour in 2011 was ‘helping a stranger’. Almost half the global population (47%) helps a stranger in a typical month. In comparison, fewer than three out of ten people ‘give money to charity’ (29%) or ‘volunteer time’ (21%) each month. The global average of the three giving behaviours in 2011 was 32.4%, compared to 31.6% in 2010.

Among the top ten givers are New Zealand, UK, Canada, the Netherlands, Thailand and Lao People’s Democratic Republic. The least charitable nation on the list is Madagascar.

Giving money to charity is growing faster among the oldest age groups. Helping strangers, meanwhile, is becoming more common among those of middle age. 30% of women donated money, while 29% of men did the same.

User

COMMENTS

Paul

6 years ago

Most of the people , when asked about Lanka , talk about LTTE and The Tamil Struggle for Independence. They would never connect Lanka with charity.

Share prices still on a minor uptrend: Friday Closing Report

Nifty still has some strength to reach 4,805 but the move will be volatile

The market pared all the gains made in the morning session and settled lower on brisk selling in blue-chip stocks by institutional investors in the second half of trade. Yesterday we had mentioned that the Nifty may see range-bound movement with an upward bias to the level of 4,805. Today the index again managed to leap ahead with a higher high and keep itself above yesterday’s low. However, the benchmark fell by 20 points on a lower volume of 52.22 crore shares on the National Stock Exchange (NSE). If the Nifty is able to make a higher low, it may reach 4,805, or else it may fall to the level of 4,670.

The market opened higher on the back of positive global cues. Wall Street closed in the green for a third straight day on Thursday after data showed weekly unemployment claims fell to their lowest in three-and-half years. The positive economic data supported gains in Asia in morning trade today. The Nifty resumed trade at 4,763, a gain of 29 points over its previous close, and the Sensex added 50 points to start the day at 15,863. Capital goods, realty, banking, metal and oil & gas stocks witnessed buying interest in early trade.

The indices hit their intraday highs within the first few minutes of the opening bell with the Nifty touching 4,763 and the Sensex scaling 15,911. However, intense volatility kept a tap on the gains with the indices trading sideways till noon.

A huge bout of institutional selling in heavyweights stocks in the post-noon session saw the market giving up all its gains and enter the negative terrain. Telecom stocks were under pressure after the department asked mobile service providers to discontinue 3G roaming arrangements.

The market continued to fluctuate in the negative territory despite the European markets trading in the green. The indices touched the day’s low in late trade with the Nifty going down to 4,693 and the Sensex falling to 15,671.

The advance-decline ratio on the NSE was 937:746.

Among the broader indices, the BSE Mid-cap index added 0.07% and the BSE Small-cap index jumped 1.07%.
 
The sectoral gainers were BSE Capital Goods (up 0.66%); BSE Auto (up 0.23%); BSE Realty (up 0.12%) and BSE FMCG (up 0.09%). The top losers were BSE Consumer Durables (down 1.15%); BSE Oil & Gas (down 1.05%); BSE Bankex (down 1.04%); BSE PSU (down 0.65%) and BSE Metal (down 0.42%).

Wipro (up 2.17%); BHEL (up 1.91%); Hindustan Unilever (up 0.83%); Tata Motors (up 0.52%) and Maruti Suzuki (up 0.38%) were the key gainers on the Sensex. The leading losers were NTPC (down 3.27%); DLF (down 2.23%); Jaiprakash Associates (down 2.01%); Tata Steel (down 1.81%) and Bajaj Auto (down 1.47%).

The top stocks on the Nifty were Siemens (up 2.35%); BHEL (up 2.15%); Grasim (up 2.04%); Wipro (up 1.92%) and Sesa Goa (up 0.97%). On the other hand, Ranbaxy (down 4%); NTPC (down 3.09%); Reliance Communications (down 2.99%); BPCL (down 2.97%) and IDFC (down 2.66%) were the major losers on the index.

The market settled lower, snapping its two-day gaining streak, on institutional selling in the second half of trade. The Nifty closed with a loss of 20 points at 4,714 and the Sensex settled 75 points down at 15,739.

The Asian pack closed higher, taking support from the positive US economic data, which eclipsed concerns about the European debt crisis. While weekly jobless claims fell to their lowest in three-and-half years last week, consumer confidence rose to a six-month high in December. Trading was low-key in Asia as the Japanese market was closed for a local holiday.

The Shanghai Composite gained 0.85%; the Hang Seng surged 1.37%; the Jakarta Composite added 0.04%; the KLSE Composite gained 0.31%; the Straits Times climbed 0.44%; the Seoul Composite advanced 1.07% and the Taiwan Weighted jumped 2.07%. The Nikkei 225 was closed for trade. At the time of writing, major European indices were trading nearly 1% higher and the US stock futures were trading in the positive.

Back home, foreign institutional investors were net sellers of stocks totalling Rs236.39 crore on Thursday. On the other hand, domestic institutional investors were net sellers of equities amounting to Rs229.74 crore.

Air-conditioning and commercial refrigeration firm Blue Star today said it is setting up a new plant in Ahmedabad at an initial investment of Rs15 crore and is likely to start production from the facility by the end of this fiscal. The plant will manufacture refrigeration products such as deep freezers, bottle coolers, milk coolers and water coolers. It will have the capacity to manufacture one lakh units annually in the initial phase. The stock closed 1.53% lower at Rs157.25 on the NSE.

Steel-maker Monnet Ispat today said it will buy back shares worth up to Rs100 crore from the open market at a price not exceeding Rs500 apiece. Monnet Ispat said its board cleared the buy-back proposal at a meeting on 22nd December. The stock gained 1.51% to close at Rs363.40 on the NSE.

Orchid Chemicals & Pharmaceuticals today said it has received an initial payment of $1.5 million from Merck as part of drug development collaboration. Under the terms of agreement, Orchid is eligible to receive payments totalling more than $100 million with the achievement of various research and development milestones involving multiple candidates. The stock rose 0.11% to close at Rs140.75 on the NSE.

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